Too many things wrong (Sargent and Field edition)



And not enough time to blog about all of them. Two that seem to be really important and worth noticing in recent debates around the blogosphere among the chattering classes are the idea  (subscription required) that State Defaults after the Jacksonian economic crisis were good to establish US credibility, and the notion that Total Factor Productivity (TFP) was essential for the US recovering from the Great Depression.

Very briefly I’ll discuss why these two propositions are just wrong. Sargent argues that by guaranteeing State debts the Hamiltonian system created moral hazard, and that the States defaults of the 1840s, which resulted from this arrangement, were instrumental in creating a credible fiscal commitment to sound finance. In his words: “in refusing to bail out the states in the early 1840s … the federal government reset its reputation vis-à-vis the states, telling them in effect not to expect it to underwrite their profligacy.” The lesson for Europe is let the periphery default, and, by the way, that would lead them to fiscal consolidation by even more austerity (yep he never heard of multipliers). At any rate, this account of the United States experience is pure fiction.

First of all the collapse had nothing to do with profligacy, and all to do with prices of cotton falling, and States defaulting on foreign debt, not domestic debt. In Europe the countries do print the money in which their debt is denominated, the problem is that the ECB is not willing to do it. The crisis is self-made, and if the ECB monetized a bit of debt there would be no danger of inflation, since the economies are really (really) far from full employment.

Further, the US national government at that point had no public debt (Jackson paid it down and caused a financial crash; he also required payments of public lands in specie, that is the crisis was worsened by austerity and sound money), and no national bank or monetary authority. Hence, it could not bail the States out. Only after the Civil War, with greenbacks, a more centralized management of debt and money were created in the US. So there is no possibility that the reputation of something that did not exist until the 1860s was built in the 1840s.

Sargent's anal fixation with austerity in order to pay debts, even those in domestic currency, and his lack of understanding of basic events in the history of the United States are appalling. And this guy got a Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (yep, it’s not a real Nobel!).

Field is an interesting case. The mistake in his book is not of his making, in all fairness, but the result of the profession's lack of understanding of basic economic principles. His point, well explained by Mark Thoma, is that part of the recovery in the 1930s was caused by rapid growth in productivity (TFP). Nothing against the argument, which might be (and probably is) true, to some extent. Note also that productivity is not only pro-cyclical but also structural and demand-led, which means that some of the increase in productivity was actually caused by the recovery. But the problem is that TFP is not a measure of productivity.

Note that TFP is based on the notion that there is a production function in which output (Y) is a function of labor (N) and capital (K), and forget for a second the problems of using the notion of a quantity of capital. In addition, we know that income (Y) is equal to the payments to labor (N) and capital (K). So we have a theoretical construct and an identity:

Y=f(N, K) and Y=wN+rK

Obviously if you derive Y with respect to time, you must obtain from either equation that the growth of Y over time is a function of growth in labor and capital, and either some additional part, which depends on the technology f(…) in the theoretical construct, and the weighted average of the growth of wages (w) and profits (r) in the identity. And yes the second is an identity and by definition (constructed in the national accounts) true. So TFP is a residual that says something about income distribution. Let’s please use labor productivity, when discussing productivity. For more on that see, for example, Felipe and McCombie (2001; subscription required).

The role of the State in US Development

As part of Peter Ho's talk yesterday, two graduate students presented some of their research. One of the topics, was the role of the State, the Fiscal-Military State in particular, in the early process of industrialization and development in the US, which was, as noted by Peter, very much in line with his arguments for managed trade. Here is a link to a paper I wrote on the rise of what Schumpeter termed the Tax State. On the Fiscal-Military State read this. The classic book by John Brewer, The Sinews of Power, was essential in the development of some of these ideas, in the sense that it shows the fundamental role of the State for industrialization and the creation of a global empire. The argument put forward, in the talk yesterday, was that the US development can only be understood from a Fiscal-Military Developmental State perspective.

Historians and the surplus approach

An interesting feature of the literature in history, particularly when related to ancient history, is that ideas that are clearly in the tradition of classical political economy, that is the developments from William Petty to Marx including mainly, but not uniquely Quesnay, Smith and Ricardo, are often used in contrast with the dominant supply and demand approach of the literature in economics. The typical discussion of development presumes that it was the surplus obtained with the domestication of plants and animals, and the transition from hunter/gatherer to agricultural societies, that allowed specialization (the division of labor) and the development of social classes.

The figure below comes from William McNeill's classic The Rise of the West, and the essential concept of surplus is at the center of the stage.

In that sense, historians, contrary to economists (even economic historians) do not tend to fall into the trap of describing markets as autonomous institutions that are disconnected from society. Also, historians tend to think in terms of classes, and restrict individual behavior to the kinds of actions that are related to the underlying social class. That is true in several popular books like Jared Diamond's Guns, Germs and Steel.

The strange persistence of Monetarist history

The Monetarist view of history, as I noted in a recent post, is quite popular. The conventional wisdom on the Great Depression is that the Gold Standard forced contractionary monetary policies and the Great Contraction caused the recession. An open economy version of Milton Friedman’s story. The dominant view on the recovery from Great Depression, due to Christina Romer, is that the non-sterilized inflows of gold led to an increase of money supply. And the money supply brings the recovery. Forget the New Deal, that made things worse in the Monetarist alternative reality.

Krugman, that has otherwise done a great job of showing the anti-Keynesian bias in current discussions of the budget, also seems to have an inner Monetarist. He tells us in a recent post on taxes that: “the feds have the Fed, which can print money. But there are constraints on that, too — they’re not as sharp as the constraints on governments that can’t print money, but too much reliance on the printing press leads to unacceptable inflation. (Cue the MMT people — but after repeated discussions, I still don’t get how they sidestep the issue of limits on seignorage.)”

I guess we call endogenous money MMT (Modern Monetary Theory) now. If you print money and people spend, and there is capacity, there should be no inflation, but lower unemployment. Also, as people spend, firms tend to adjust capacity to demand. So the capacity limit is endogenous. The limit that most economies encounter is the balance of payments. As the economy grows and it imports more, eventually the current account deficit becomes too large, and depreciation fuels inflation.

But my concern is why even Krugman buys the notion that money causes prices. A graduate student told me that monetarism is a simple story that is ideologically convenient. That is true, but not ideologically convenient for progressives like Krugman. In his case and other progressives like him (there are even Marxists with Monetarist proclivities!), it seems, that the reasons have to do with the ability to convince people that certain events can only be explained by Monetarist ideas. That suggests to me that the power of institutions (universities, journals, press) that reproduce acceptable knowledge is incredible strong. Institution building should be at the top of the agenda for progressives.

Churchill and 3M Famine Deaths in Bengal in 1943

It's the debate that just won't go away: being a wartime prime minister, was Winston Churchill culpable in the death of 3 million Bengali subjects of the British Empire in 1943? A new book by Madhusree Mukerjee suggests the answer is in the affirmative. TIME has a book review of Churchill's Secret War:

In 1943, some 3 million brown-skinned subjects of the Raj died in the Bengal famine, one of history's worst. Mukerjee delves into official documents and oral accounts of survivors to paint a horrifying portrait of how Churchill, as part of the Western war effort, ordered the diversion of food from starving Indians to already well-supplied British soldiers and stockpiles in Britain and elsewhere in Europe, including Greece and Yugoslavia. And he did so with a churlishness that cannot be excused on grounds of policy: Churchill's only response to a telegram from the government in Delhi about people perishing in the famine was to ask why Gandhi hadn't died yet.

As Mukerjee's accounts demonstrate, some of India's grain was also exported to Ceylon (now Sri Lanka) to meet needs there, even though the island wasn't experiencing the same hardship; Australian wheat sailed past Indian cities (where the bodies of those who had died of starvation littered the streets) to depots in the Mediterranean and the Balkans; and offers of American and Canadian food aid were turned down. India was not permitted to use its own sterling reserves, or indeed its own ships, to import food. And because the British government paid inflated prices in the open market to ensure supplies, grain became unaffordable for ordinary Indians. Lord Wavell, appointed Viceroy of India that fateful year, considered the Churchill government's attitude to India "negligent, hostile and contemptuous..."

Mukerjee's prose is all the more devastating because she refuses to voice the outrage most readers will feel on reading her exhaustively researched, footnoted facts. The way in which Britain's wartime financial arrangements and requisitioning of Indian supplies laid the ground for famine; the exchanges between the essentially decent Amery and the bumptious Churchill; the racism of Churchill's odious aide, paymaster general Lord Cherwell, who denied India famine relief and recommended most of the logistical decisions that were to cost so many lives — all are described in a compelling narrative.

Naturally, the Churchill Centre would most strenuously demur:

We asked author [of Gandi & Churchill Arthur] Herman to elaborate. He writes: “The idea that Churchill was in any way ‘responsible’ or ‘caused’ the Bengal famine is of course absurd. The real cause was the fall of Burma to the Japanese, which cut off India's main supply of rice imports when domestic sources fell short, which they did in Eastern Bengal after a devastating cyclone in mid-October 1942. It is true that Churchill opposed diverting food supplies and transports from other theaters to India to cover the shortfall: this was wartime. Some of his angry remarks to Amery don't read very nicely in retrospect. However, anyone who has been through the relevant documents reprinted in The [India] Transfer of Power volumes knows the facts:

"Churchill was concerned about the humanitarian catastrophe taking place there, and he pushed for whatever famine relief efforts India itself could provide; they simply weren't adequate. Something like three million people died in Bengal and other parts of southern India as a result. We might even say that Churchill indirectly broke the Bengal famine by appointing as Viceroy Field Marshal Wavell, who mobilized the military to transport food and aid to the stricken regions (something that hadn't occurred to anyone, apparently).”

The salient facts are that despite his initial expressions about Gandhi, Churchill did attempt to alleviate the famine. As William Manchester wrote, Churchill “always had second and third thoughts, and they usually improved as he went along. It was part of his pattern of response to any political issue that while his early reactions were often emotional, and even unworthy of him, they were usually succeeded by reason and generosity.” (The Last Lion, Boston: 1982, I: 843-44).

The Unconsidered Factor: World War II

If the famine had occurred in peacetime, it would have been dealt with effectively and quickly by the Raj, as so often in the past. At worst, Churchill’s failure was not sending more aid—in the midst of fighting a war for survival. And the war, of course, is what Churchill’s slanderers avoid considering.

The fog of war still clouds this moment in history.

Visualizing the World's Shifting Economic Centre

From the latest issue of the LSE Research newsletter--which I will talk about more soon--comes interesting research in economic geography care of Danny Quah, head of our nation- and perhaps even world-leading Economics department and a fellow here at LSE IDEAS like a certain blogger you may know about ;-) Click for a larger image:

Danny Quah writes: This map depicts the dynamics of the global economy's centre of gravity, the average location of economic activity across geographies of the Earth. My calculations take into account all the GDP produced on this planet. I found in my research that in 1980 the global economy's dentre of gravity was in the mid-Atlantic. By 2008, as a result of the continuing rise of China and the rest of East Asia, the economic centre of gravity (ECG) had drifted to a location east of Helsinki [Finland] and Bucharest [Romania]. Extrapolating growth data in almost 700 locations across Earth, I have projected that by 2050 the world's ECG will have shifted east 9,300 hundred kilometres from its 1980 location--landing, appropriately enough, at a point between India and China.

PRC Tips for Understanding American Naivete

In Graham Greene's famous, twice-filmed novel The Quiet American, the titular character Alden Pyle represents blind faith in The Enduring Goodness of America despite harbouring much capacity for harm in trying to bring such naivete to life. That is, remaking the world in the image of American-style capitalist liberal democracy would supposedly deliver the rest of us primitives to a higher state of enlightenment.

To be sure, there is a bland, whitebread sameness that pervades much of the Amerocentric blogosphere. While you get variations here and there, the end message inevitably converges on a similar idea: a combination of democracy and markets will deliver freedom 'n' growth to uplift even the most benighted.

So it comes as no surprise that the Chinese have been at the receiving end of this shtick for the longest time from the Americans. However, China's relative ascent means it has become less and less willing to take rewarmed Alden Pyle-ish statements at face value. Recently, I read David Shambaugh's book China's Communist Party: Atrophy and Adaptation. An important takeaway is the Chinese do understand that the Alden Pyle complex is very much real. Compared to Europeans who've been there, done that, seen the movie, and bought the T-shirt, the US still tries to do what the erstwhile European imperialists ultimately gave up on.

The Chinese Academy of Social Sciences came up with this trenchant observation quoted by Shambaugh on p. 101:

The most characteristic policy in Europe is rationalism, while the most valued philosophy in the U.S. is pragmatism. The latter deals with the world task-by-task and does not tend to analyze situations deeply or systematically. While it is not irrational, it is a more simplistic and shallow worldview than rationalism. European rationalism considers situations more comprehensively and more deeply. As a result, Europe has a more mature outlook on the appropriate paths for global development. The philosophically shallower U.S., however, often has a hard time understanding the depth of European thinking and the extremely complex world.

U.S. assessments of the global situation are often simplistic and biased, as exemplified by the belief that transforming the rest of the world in the mold of American-style democracy will guarantee world peace. Europeans once wanted to use religion and weapons to conquer the world, but their experiences with the tragedies of many wars have forced them to reexamine the nature of power. Americans are merely repeating the mistakes that Europeans have already learned from. European culture is actually more respectful of diversity of cultures…The U.S. approach to global cultures is to try to conform other cultures to Western civilization. In contrast, Europe emphasizes the need for global cultural tolerance and dialogue.

That sounds about right to me. Just see how far plying freedom 'n' growth shtick will get you in today's world. Make no mistake: the Chinese understand.

Tory Scare Story: Vote for Us or UK is IMF-Bound

As things stand, the upcoming British general elections scheduled for the sixth of May are going to result in a hung parliament or having no party with a clear majority. In that event, a coalition government will need to be formed, with the Liberal Democrats and Labour being more natural allies than the Lib Dems and the Conservatives or even a grand coalition of Labour and the Conservaties. Matters are complicated by the Liberal Democrats stating they would rather play for an outright majority than signal which other party they'd rather go into a coalition with. Now, I've expressed my strong support for the Liberal Democrats (obviously), but the chain of arguments that the Conservatives or "Tories" are putting forward now goes something like this:

1. A hung parliament causes political uncertainty that unnerves markets;
2. The last time Britain had a hung parliament, a Lib-Lab (Liberal Democrat/Labour coalition) government resulted;
3. This Lib-Lab coalition was in place when Britain had to take a £2.3 billion loan from the IMF in 1976;
4. So, if you don't want a rehash, you better vote Conservative.

The ball started rolling on this fearmongering when Shadow Business Secretary Ken Clarke tried to arrest the Lib Dems' momentum by bringing up this analogy yet again:

"Bond markets won't wait," the shadow business secretary said of the likely City reaction to post-election backroom deals at Westminster. "Sterling will wobble. We have seen even minor flickers in the opinion polls causing problems with interest rates in the recent past...If the British don't decide to put in a government with a working majority, and the markets think that we can't tackle our debt and deficit problems, then the IMF will have to do it for us..."

Back in London Clarke livened up the election as he recalled the Lib-Lab pact that helped prop up Jim Callaghan's government from 1977, when Labour lost its majority. Clarke, who was first elected to parliament in 1970, said: "It was a farce, it was a fiasco, it didn't save us from disaster. And I would be very, very alarmed if any prospect of that occurred on this occasion."

Clarke said that the state of Britain's public finances – the fiscal deficit of £167bn is nearly double the borrowing requirement in 1976 when the IMF was called in – was so serious it needed decisive action. "This is worse than the Conservatives took over in 1970, worse than Labour took over in 1974, worse than when we took over in 1979, and it really is going to require strong, purposeful government confident of its majority to put things into place."

George Osborne, the shadow chancellor, did not go quite as far as Clarke, but he warned of the dangers of a hung parliament. "It is a statement of fact that the last time the IMF came in was when the governing party did not have a workable majority in parliament. "I don't think people should underestimate the economic consequences of political instability in this country at a time when we are running one of the largest budget deficits in the developed world, when people have questioned our credit rating and people can see there is a very serous problem with employment and business confidence. That is a very serious economic challenge. Political instability and a hung parliament – people need to be aware of the consequences of that."

And so this Clarke-borne brouhaha went into the second debate among prospective finance ministers or chancellors in British-speak (see footage here). Once more, the Tory Osborne reiterated this nightmare scenario while being rebutted by both the Liberal Democrats' Vince Cable and current Chancellor Alistair Darling, he of the famous eyebrows:

If financial markets lose confidence in the U.K. government's ability to repay its debt, the International Monetary Fund would have to be called in to offer aid, opposition Conservative spokesman George Osborne said Wednesday. In a three-way debate with Chancellor of the Exchequer Alistair Darling and Liberal Democrat Treasury spokesman Vince Cable on BBC Television, Osborne said: "If markets don't feel confident that we could pay down our debt we'd have to call the IMF in, that's a statement of fact."

The opposition spokesman also warned that if the U.K. election results in a hung parliament, it would raise the chances of Britain needing IMF financing. "The only time we had the IMF was when we had a hung parliament," Osborne said.

Darling said Osborne's comments were scaremongering and accused the Conservatives of making unfunded promises in their budget plan. "Its pretty desperate stuff--what really does destabilise markets is where you make promises you can't pay for," the Chancellor said. "That is what makes markets roll their eyes...this really is a ridiculous approach."

Vince Cable makes essentially the same point, and for once, I do agree with Darling. What the Conservatives fail to disclose, though, is that Britain's fiscal woes were in evidence well before the UK headed to the well. Indeed, it was a Tory leader who already had an IMF rescue on the drawing boards in 1974:

Edward Heath’s Conservative Government was preparing to take “unpleasant measures” and apply for an International Monetary Fund loan in 1974, documents unearthed from the National Archive show. The disclosure will help to blunt one of the Tories’ sharpest and most enduring political barbs of the past generation: a bankrupt Labour government being forced to go “cap in hand” to the IMF in 1976.

One document — stamped “secret” and never previously published — shows how Heath met Jeremy Thorpe, the Liberal Party leader, on March 2, 1974, to discuss terms for a coalition government after the general election three days earlier that had resulted in a hung Parliament. The two men discussed a range of issues, including the Liberals’ long-standing demands for electoral reform, before turning to the “measures required to deal with the economic crisis — which would be unpleasant but must be fair as well as effective — and to command confidence overseas...”

The minutes, drawn up by Robert Armstrong, Heath’s principal private secretary, state: “On a Privy Councillor basis the Prime Minister told Mr Thorpe that preparations had been made for a drawing on the International Monetary Fund.” While Mr Thorpe suggested that there would be all-party support for an immediate loan, Heath was less certain, saying: “The Labour Party might be critical of the terms of such a drawing.”

Discussions on a Privy Councillor basis are not normally released, even under the 30-year rule, and this document appears to have been put in the public domain by accident. Although IMF borrowing by Britain was not unprecedented and the scale proposed by Heath is unclear, the reference to Labour being wary of conditions attached suggests that the IMF would have required significant spending cuts.

The power-sharing talks with Mr Thorpe failed and Heath resigned two days after the meeting, allowing Harold Wilson to return to Downing Street with a minority Government. Seven months later Labour won an overall majority when a second general election was held in October. It was, however, an era of burgeoning economic crisis around the world, as well as industrial strife in Britain. Only days before the February 1974 election, monthly trade figures had shown a record £383 million deficit. In 1976 the Labour Government was plunged even deeper into that economic mire. Denis Healey, the Chancellor, was forced to turn back at Heathrow — where he had been due to catch a flight to Manila for talks with the IMF — to quell panic in the markets with a speech to the Labour conference.

The £2.3 billion IMF loan that he negotiated was offered in return for spending reductions imposed by German and American shareholders that foreshadowed the monetarist policies of Margaret Thatcher’s Government.

It is a psychological fact that persons tend to have selective memories.

Geither, Japan's FinMin Weigh In on RMB Decision

Perhaps Chinese monetary authorities are like children: the more you tell them to do something, they do the opposite. But, don't tell US Treasury Secretary Tim Geithner that since he's still agitating for a move in light of the upcoming April 15 decision on whether to label China as a currency transgressor:

Treasury Secretary Timothy Geithner said on Friday he wanted to maximize the odds that China would lift the value of its yuan currency quickly and said he believed that they would do so. "It's very important that China move," Geithner told Bloomberg Television. "I'm quite confident that they will decide it's in their interest to move. We're going to try to make sure we're going to maximize the chance that they move quickly."

He did not directly answer a question on whether the Treasury would delay a much-anticipated currency report in which it could decide to label Beijing as manipulating the value of the yuan.

It's interesting that that the Japanese Finance Minister Naoto Kan isn't saying the same thing quite so explicitly. Taking the more diplomatic route, he notes that Japan won't really be as interested in the outcome. Nevertheless, Kan hints that China might face an asset bubble of its own alike that which helped sink Japan's fortunes in the not-so-distant past. Call it an implicit warning that points in the direction desired by US and EU bigwigs:

Japan's Finance Minister said on Saturday he told Chinese Premier Wen Jiabao he expects China to make a wise decision on the issue of its yuan currency amid international pressure for China to let its currency strengthen. "The issue of the yuan, currencies and excess liquidity are related to each other. I told him that," Naoto Kan, who is also deputy prime minister, told reporters after meeting Wen in Beijing on Saturday. "But I did not tell him what to do." Kan also said he warned Wen about possible impacts an asset bubble could have on an economy as Japan is still suffering the consequences of the burst of its property bubble in the 1990s.

China has come under pressure from some Group of Seven rich nations to revalue its currency, which some economists say it keeps artificially low, giving it an unfair export advantage and hindering more balanced economic growth.

But Wen said arguments on the issue should not be made in a one-sided manner, Kan told reporters. "He told me that there are various relations with regard to trade, such as Japan-China, U.S.-China and EU-China, so things should not be said unilaterally," he added. "Generally speaking I think that's right. With regard to Japan-China trade, Japan has no major problems... but relations vary with other countries, so I told him that I expect China to make a wise decision as it has done so [before]."

Tokyo believes that a more flexible yuan is desirable for world economy and China, which has taken over the United States as Japan's No.1 export destination. But it has been more reserved than some of its G7 peers in its criticism of China's currency system on the view that pressuring Beijing could backfire.

Understand China's Foreign Policy, Know Zheng He

This is an addendum to a recent post I've made concerning my views on how China should curry favour with ASEAN. While performing research on China's diplomatic outreach to Southeast Asia, I've been struck by the constant allusion of Chinese officials to the historical figure of Zheng He. The renowned Muslim admiral helmed the famous treasure ships that explored Southeast Asia, South Asia, the Middle East, and East Africa in the 15th century. Well before Columbus accidentally happened upon the New World in the 85-foot Santa Maria in 1492, Zheng He's seven voyages between 1405 and 1433 featured 400-foot junks that manifested China's comparative might before Western interlopers. Along the way, Zheng He established a tributary system centred on the Middle Kingdom. (PBS has a fine online feature about Admiral Zheng He's voyages.)

Especially since 2005--the 600th anniversary of Zheng He's maiden voyage to parts (somewhat) unknown--Chinese official history has resurrected Zheng He as a metaphor for China's current "peaceful rise" after being under the white man's thumb for a couple of centuries. That is, while Zheng He had an overwhelming advantage as evidenced by his mighty vessels (just as China now has in the economic realm over its Southeast Asian neighbours), he never did what Western navigators and others who followed in his wake did. That is, Zheng He never did establish colonies, take other peoples as slaves, spread disease, pillage entire cities, or otherwise commit atrocities in the name of God, the White Man's Burden, or co-prosperity.

For instance, look at this speech I've excerpted by PRC State Councilor Dai Bingguo before the ASEAN Secretariat in Jakarta earlier this year. I don't make this stuff up for the narrative fits to a "T":

Some friends may say, yes you are a developing country, but you are so big, your economy is so large and grows so fast. That is somewhat fearful. Indeed, China is a big country, and with rapid economic growth. When people associate it with the behavior of some big countries in history, it is natural that they may feel a bit worried. But I want to assure you that China is not to be feared. It is a reliable neighbour and friend for you.

Let's look at China's history. Does China have the tradition and culture of aggression and expansion? I have noted many people across the world say "no". China did not seek expansion or hegemony even at the time when it was the most powerful country in the world with 30% of the global GDP a few hundred years ago. Many of you know about Zheng He's voyages to the Western Seas. Leading the most powerful fleet in the world, Zheng He made seven voyages to the Western Seas, bringing there porcelain, silk and tea, rather than bloodshed, plundering or colonialism. They also brought those countries tranquillity and well-being by helping them fight pirates. To this day, Zheng He is still remembered as an envoy of friendship and peace, and his merits are widely recognized by people of Southeast Asia, including Indonesia.

While the analogy may stumble on a few points, he did establish nominal suzerainty over many important trading posts after all, it's certainly a mark of how far the Chinese have come in terms of diplomatic sophistication in recent years compared to certain others. In contrast, what can the Yanks say to Southeast Asia at the current time? Do as we say, not as we do? Somehow, a venerated navigator--and a multicultural Muslim one at that--would tend to trump a bunch of hypocritical white guys in PR terms. Needless to say, Obama and Co. have their work cut out for them if they think they can dislodge China's influence in its own backyard. Certainly, the tide of history is not going in their favour as Sammy embarks on the comfortable path to ruin.

There's another good YouTube video on Zheng He's legacy where the commentator says all that needs to be said about him: the perfect figure for China's modern day spirit of openness and engagement with the outside world.